Yahoo! Jumps On Microsoft Talk

Shares of
Yahoo
opened dramatically higher Friday after a report that
Microsoft
is courting the company for a sale.

Yahoo
shares rocketed Microsoft 15.4% higher, gaining $4.34, to $32.52, after the New York Post reported
Microsoft
has approached the Internet portal to enter into formal sale negotiations. Microsoft reportedly approached Yahoo a few months ago with a similar offer but was turned down.

Investors were less sure of the benefit of a possible deal for Microsoft. Its shares were down 62 cents, or 2.0%, to $30.35, in Friday morning trading. With Yahoo's market value of around $44 billion, its purchase would be an uncharacteristically large acquisition for a company that has generally preferred to grow its business organically.

However, Yahoo would hugely boost Microsoft's presence in the online arena, where it has been eager to expand but recent attempts have failed. Last month,
Google
outbid Microsoft to land internet ad firm DoubleClick for $3.1 billion. (See: "The DoubleClick Effect".) Google also beat out Microsoft for an advertising deal with
Time Warner
's AOL.

A purchase would also allow Microsoft to further expand from traditional strongholds, like office software, where competition is increasing. Google is developing an Internet-based suite of applications that threaten Microsoft's Office line. (See: "Microsoft Vs. Google: The Office Battle Is Joined".)

The deal speculation pushed Yahoo near its 52-week high. Its shares have lagged on stagnant earnings that disappointed investors betting on big growth from the company. Before Friday's opening, shares had lost 14.0% over the previous year.